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Stock Price Index

Updated on March 13, 2023

A ‘Stock Price Index’ or ‘Share Price Index’ is an Index which is calculated on the basis of prices of common shares of companies which are traded on stock exchanges. Stock price index is constructed with the help of closing stock prices, daily volumes, stock weightage etc. The price index measures the change in value of the stocks in the index. It also measures changes in the market capitalization of the share or collection of shares in the index. Data related to stock price index is compiled by the exchanges or other agencies.

Importance of Stock Price Index

1. It is used by traders, investors and other stakeholders for analyzing their investments against the Index.
2. Investing in a Stock Price Index investment helps in diversification and risk management.
3. It allows passive investors with hassle free investing as the Index does the Fund Manager’s job and the investment can largely move in line with the performance of the Price Index.